Why e-commerce must listen to Kumar Mangalam Birla

The access and convenience are reasons why e-commerce will live forever, at least until a better technology overtakes it. But that is no reason to be sanguine. Online retailers will still do well to pay heed to what Kumar Mangalam Birla, chairman of Aditya Birla Group, told The Economic Times in an interview.

Kumar Mangalam Birla says e-commerce must make returns, for one cannot have unlimited access to funding. (HT Photo)

LimeRoad, the Gurgaon-based online fashion retailer for women, lets users create and share collages – pieces of clothing, shoes, bags, other accessories – to present a complete look. The site calls them scrapbooks. There are more than 1.5 million on the site. Thousands of them are created by women from unexpected places, such as small places in Jharkhand.

Suchi Mukherjee, Lime-Road’s founder and CEO, once spoke to one of those women to say the looks she had created were absolutely lovely. Would she like to come to a press conference the company was holding in Patna? That wouldn’t be possible, the Jharkhand woman said, her family wouldn’t let her travel. But she was happy doing the scrapbooks. Every time she did one, she felt she had soared beyond her place.

To Mukherjee, that was a magical moment, the kind that makes her pinch herself. Is it really happening?

She need not pinch herself a second time. It is all happening in the world of consumer internet. It has become an avenue for people from Jharkhand to Jorhat to express themselves.

This expression takes various forms. A fellow in Jammu, looking for a particular book, just orders it on Flipkart. His father may have had to travel to Nai Sarak in Old Delhi for one that was difficult to find. A rich businessman’s son in Ambala no longer travels to Delhi to buy Ralph Lauren shirts. Any of several e-commerce sites delivers it to his doorstep. The mother of a toddler in Ghaziabad, when she needs baby diapers or wet wipes, just orders it on Firstcry. This writer took a fancy to the Merkur razor, which is made only in Germany and was praised by Esquire magazine. It took 12 days to come, but a dealer in the United States delivered it through Amazon.

This convenience manifested itself early in the immense popularity of the railway ticketing site IRCTC, which saved millions the torture of travelling to a railway station, spending hours in sweaty queues, and facing a rude man at the counter. Now it has turned into a people’s movement and is driving the sales of... of nearly everything. Why, you can even order tea on the Internet. It will come to you nice and hot.

The access and convenience are reasons why e-commerce will live forever, at least until a better technology overtakes it. But that is no reason to be sanguine. Online retailers will still do well to pay heed to what Kumar Mangalam Birla, chairman of Aditya Birla Group, told The Economic Times in an interview. “At the end of the day, the financial investor will also have to make returns. One thing I am sure of is that you can’t have unlimited access to capital funding. Therefore, the question that comes to my mind is whether the deep discount model is sustainable at all.” That strikes a chord with the people who have been wondering whether the success of e-commerce is all about the discounts.

It cannot be. The discount model has already been tried out by offline retail, which now finds itself being overtaken, especially in the consumer’s mind, by the online kind. Secondly, there is a reason why some online guys are more successful than the others even though many are playing the same discount game. Even in the new world, the old-world factors of quality, assurance and customer experience count. What’s more, within the world of online commerce, distinct identities are emerging. So while women express themselves on LimeRoad, ShopClues is the Karol Bagh online – you will also find the high-end stuff there, but you would go there to get the best possible at the lowest price and the largest collection of it.

Still, sooner or later, investors will want to see returns. Some day they will have had enough of GMV – gross merchandise value, the total value of all transactions – that is now generally accepted as a measure of performance for an online marketplace. E-commerce needs to take the next step and earn the consumer’s loyalty, stop him from site hopping merely in search of a lower price.

G Shankaran Nair, chief strategy officer of Servion, which makes solutions that enhance customer interaction through phone, chat, social media, and email, hits the nail on the head. E-commerce companies have a lot of data, he says. “But they use that data only for customer monetisation. They should use some of it to win customer loyalty.”